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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






2. Models where firms agree to mutually improve their situation






3. The imbalance between limited productive resources and unlimited human wants






4. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






5. The lost net benefit to society caused by a movement away from the competitive market equilibrium






6. The rational decision maker chooses an action if MB = MC






7. MUx / Px = MUy/Py or MUx/MUy = Px/Py






8. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






9. The mechanism for combining production resources - with existing technology - into finished goods and services






10. The total quantity - or total output of a good produced at each quantity of labor employed






11. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






12. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






13. Entry (or exit) of firms does not shift the cost curves of firms in the industry






14. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






15. Exists if a producer can produce more of a good than all other producers






16. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






17. All firms maximize profit by producing where MR = MC






18. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






19. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






20. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






21. A firm that has market power in the factor market (a wage-setter)






22. Ed = 1






23. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






24. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






25. Entry of new firms shifts the cost curves for all firms upward






26. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






27. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






28. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






29. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






30. Ei = (%dQd good X)/(%d Income)






31. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






32. Two goods are consumer substitutes if they provide essentially the same utility to consumers






33. AVC = TVC/Q






34. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






35. Models where firms are competitive rivals seeking to gain at the expense of their rivals






36. Ed = 0 - no response to price change






37. AFC = TFC/Q






38. Ei > 1






39. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






40. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






41. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






42. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






43. The difference between total revenue and total explicit costs






44. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






45. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






46. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






47. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






48. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






49. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






50. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit